Is the simple approach ok? - Aussie Stock Forums

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  1. #1

    Default Is the simple approach ok?

    Hey guys, New here.

    Basically I had some cash that was sittin in the bank earning a 'solid' 5.5%, which would then screw me over come tax time..

    So i put a decent (for me) amount into shares a year ago and mostly strong apart from one deep cut.

    My knowledge about shares is quite infant, and I basically select shares by company and just watching the chart when to buy. Ie Picking what I think is a stable company and trying to buy in at a not-too-bad entry price..

    This may not be highest payback option but is it an OK method? I figured If I cant get at least a 5-10% increase whats the point im better off back in the bank.

    So i look at what I think are stable companies.. Like BHP, Banks etc.

    Also - I am trading with StGeorge (as thats who i bank with) but I can only purchase Aus Shares. This is an AUSSIE stock forum but am I missing out by not being able to get into foreign markets?

    Cheers guys!
    Will be trying to spend more time learning here.
    barnz2k's random blog
    ASX needs to HTFU!

  2. #2

    Default Re: Is the simple approach ok?

    As for foreign markets, don't go there yet. You need more money to make it worthwhile due to higher brokerage, and there is also more inherant risk due to exchange rates. So while your shares might go up 10%, if the exchange rate moves unfavourably by 10%, you've gained nothing.

    Your approach may work, I'd suggest looking at the dividend yield as well. 'Theory' says that the dividend is the sole thing used to price shares.

    If a share's dividend yield is only 2%, then even though it might go up, and be going up already, there are probably better opportunities.

    For example, and I do own these so take my advice with a grain of salt, zinifex currently has an upcoming dividend which will be around 4% yield. You can also claim imputation credits in your tax return, as this has already been taxed at 30%. This dividend is only for half of the year, of you hold them for the full year, you are likely to get 8%+ easily in dividends alone. So look at the capital gain you expect, I'm not going to speculate here on how much that might be, but you see what I mean. Gaining 8% in dividends leaves a lot of 'safety' for the price going down a bit.

    The banks all have a half decent dividend yield which is around 5% p.a. as well as good capital gains. So these could be called nearly as safe as a bank account, and 10-15% annual return overall.

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